CzeCh airlines - České aerolinie

NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 31 December 2010
annual report 2010 | 50
2. ACCOUNTING PRINCIPLES AND POLICIES
The Company’s accounting books and records are maintained and the financial
statements have been prepared in accordance with the Accounting Act 563/1991
Coll., as amended; the Regulation 500/2002 Coll., which provides implementation
guidance on certain provisions of the Accounting Act 563/1991 Coll. for reporting entities
that are businesses maintaining double-entry accounting records, as amended;
and Czech Accounting Standards for Businesses, as amended.
The accounting records are maintained in compliance with general accounting
principles, specifically the historical cost basis with certain exceptions (as further
described in this note), the accruals principle, the prudence concept and the going
concern assumption.
These financial statements are presented in thousands of Czech crowns (“CZK”),
unless stated otherwise.
The Company also prepares consolidated financial statements.
Tangible Fixed Assets
Tangible fixed assets include assets with an estimated useful life greater than one
year and an acquisition cost greater than CZK 5 thousand on an individual basis.
Tangible assets with an acquisition cost less than CZK 5 thousand on an individual
basis are expensed upon acquisition.
Acquisition Cost
Purchased tangible fixed assets are stated at acquisition cost less accumulated
depreciation and allowances for diminution in value. The acquisition cost includes
the purchase cost and costs attributable to the acquisition.
Tangible fixed assets developed internally are valued at direct costs, which include
direct material and payroll costs and incidental costs directly attributable to the
internal production of assets (production overheads).
The following tangible fixed assets are stated at replacement cost: tangible fixed
assets acquired without consideration on the basis of a contract to purchase
a leased asset (finance lease) and tangible fixed assets recently identified and
recognized (accounted for by a corresponding entry in the relevant accumulated
depreciation account). The replacement cost of tangible fixed assets is determined
by reference to the normal market price effective at the time that these assets are
acquired / identified.
The cost of a fixed asset technical improvement exceeding CZK 40 thousand per asset
for the taxation period increases the acquisition cost of the related tangible fixed
asset.
Depreciation
Depreciation is charged with respect to tangible fixed assets, other than land and
assets under construction, over their estimated useful lives, using the straight line
method, on the following basis:
Number of years
Buildings 30–50
Computer equipment with an acquisition cost above
4
CZK 40 thousand
Computer equipment with an acquisition cost
between CZK 5 thousand to CZK 40 thousand
3
Radio and communication equipment and systems 4
Vehicles – other than aircraft 4
Vehicles – neawly purchased aircraft
Airbus A320/A319/A310, Boeing B737 20
ATR 18
Rotables
Over the expected useful life of the relevant aircraft
Technical improvements of assets held
under operating leases
Over the term of the operating lease
Furniture and fixtures 8 or 15
Other tangible fixed assets with an acquisition cost
between CZK 5 thousand to CZK 40 thousand
2
Rotables are depreciated to the expected residual value of 10% of cost.
Assets held under finance leases are depreciated by the lessor. Following the expiration
of finance leases, aircraft acquired under finance leases are depreciated over
their remaining estimated useful lives.
Retirement of Assets
The gain or loss arising from the disposal or retirement of an asset is determined as